Thursday, December 16, 2010

Why We Should Get Ready for a Plunge in Print-Book Sales

I wrote earlier this week that publishers need to prepare for a decline in print-book sales that's much steeper than what we have seen thus far, and that is likely to accelerate the reshaping of the industry. The reasons why this seems inevitable derive not from any intrinsic superiority of e-books, nor any growing technophilia or screen-tropism of readers, but rather from the structure of the market.

For one thing, e-book sales don't replace p-book sales on a one to one basis, as my colleague Evan Schnittman points out in his post "E-Books Don't Cannibalize Print, People Do." Evan argues that once you have adopted an e-reader--whether it's Kindle, Nook, or your iPhone--you soon give up buying print books. You become so happy with the convenience of instant purchase and the bookshelf-in-your-briefcase that you virtually give up purchasing hardcovers--in fact, he argues, you'll simply forgo a title that's not available in e-format.

I don't think this holds true 100% for all readers--I read e-books aplenty but still buy p-books. But my hunch is that Evan is pretty much on the money: the graph of p-books purchased by an e-reader owner is a step-function. It doesn't slope down gradually, it drops almost straight down once someone becomes an e-book convert. (The good news for publishers is that (a) those e-book sales can be more profitable than print and (b) the graph of e-books purchased by the new e-thusiast is of course also an upward step function, from zero to lots. Lots of evidence suggests these e-thusiasts buy more books than ever, partly because it's so easy to do. But right now I'm focusing on print, which is a less happy story. Keep in mind that those e-reader owners are usually avid readers, i.e. they are our best customers for print books.)

So at the level of individual consumers we're losing not just one print-book purchase at a time, but potentially scores, or hundreds, as that person adopts e-reading. Now look at this at the level of bookstores. Right now e-book sales constitute, at a rough guess, 10 percent of the market and their share is growing rapidly. For many small businesses, especially in a low-margin industry like ours, losing 10 percent of your sales volume is the difference between profit and loss. Even a 5 percent dip is a challenge; imagine looking at a 10 percent dip and thinking, next year it'll be 15, and the year after, who knows? Yesterday I linked to an NPR story about a couple of independent booksellers who have prospered despite the difficult market, and hats off to them. But over the past several months, stories of bookstore closings have, alas, been more common. This week, two beloved indies in Minnesota announced closures, explicitly pointing out that they have lost customers and sales to the e-book revolution. One store owner made the complaint, common among booksellers, that customers browse her shelves to decide which books to download at home. " We're really now a showroom for books." You can see why these folks may decide it's time to call it quits.

This, too, is a step function. When a bookstore closes, the sales at that location don't slope down, they drop to zero. Multiply this across many bookstore closings--including locations now being closed by the chains. Furthermore, many surviving stores, in self-defense, are devoting more shelf space to nonbook items, which means fewer print books stocked, and fewer sold. With all this, it seems clear to me that print sales are going to fall, if not off a cliff, down a teeth-rattling escarpment. Just to tighten the spiral, we're also going to see smaller print runs, thus higher per-copy costs, thus higher prices for printed books--which is only going to push more consumers toward e-books!

What all this means is: up to now, e-book sales have been growing faster than hardcover sales have been declining, so overall big publishers have been seeing growth. But we may soon reach a tipping point where because of the loss of sales outlets, print sales drop off much faster than e-books replace them. I remember the wailing and gnashing of teeth--and the austerity programs and downsizing-- among publishers back in the 90s, when the chains' great expansion of superstores leveled off (that is, when sales merely stopped growing, never mind declining).

I'm not predicting apocalypse here, or even calamity. As I said in yesterday's post, I expect hardcover books, bookstores, and publishers to survive, and some even to prosper. But I am predicting major disruption.

@Anon, many thanks for that link. Tim's smart post carries the logic even further. Anyone who reads this blog with any regularity will know that I think Mike Shatzkin's observations on publishing are indispensable. I'm content to gnaw on the same bone.

Well I've been obsessing about these same issues even though not based in the States. It's a big bone...

That said it looks like the greatest sort term disaster is the likely bankruptcy of Borders, an event inextricably linked to bad business decisions by management. No doubt they will also blame it on ebooks though.

You might want to explain why you think e-book sales can be more profitable than print. It can't be because of the costs of publishing since the costs associated with print--paper, printing, binding, & warehousing--constitute only about 25% of the overall costs of publishing a book, and they are offset by the added costs of digital publishing (IT staff, equipment, XML markup, etc.). Where savings really can occur most are for trade publishing with the reduction in returns that e-book publishing promises (though returns do not disappear altogether in the digital world). What is true for trade publishing, however, is not necessarily true for other sectors of publishing. Textbook publishers will benefit most by the elimination of the used book market. Scholarly publishers can benefit, in cash flow and inventory costs, from using POD instead of offset printing. There can be no blanket, across-the-board statement about how e-nook publishing will change the industry. By the way, as an iPad owner, I don't buy any e-books but simply download the free public-domain classics to read on my device; I continue to buy new books in print.

@Sandy, note that I said "can" be more profitable than print, not "are" more profitable! Of course you're right that there are plenty of costs in digital publishing, as we publishers constantly point out to readers grousing about the price of e-books. The fact is that it's really difficult to untangle the costs of e-books in any house that publishes both print and electronic editions. And it is certainly possible to publish e-books UNprofitably.

The question of how e-books affect different sectors of publishing is an interesting one. I would think they'd be a great thing for scholarly publishers for the reasons you mention, especially with POD included in the mix. I would expect that a lot of the monographs that are so difficult to publish would move to an entirely POD/e-book existence. But you know more about this market than I do and I'd welcome further comments about it.

It's fascinating that you divide your p- vs. e- reading by only reading free titles on your iPad. As I said, I'm still a multiple-format reader--some I read on my iPad, some in print, and when commuting I read on my iPhone.

On the ebook size we need to bear in mind the opportunity to protect a high enough price point to make better profits and also the marketing opportunity to make reading exciting again for a bigger mass market audience. Protecting P-books is of course important, but if we bear those two things in mind the inevitable decline in the p-book (to whatever extent) will be less of an emotional and brutal experience for us publishers in the future!

Important points to make, and neatly expressed. But there are two more factors that affect the overall picture of the future of print.

These are online sales of physical books through e-retailers, and the sales of POD versions by small and micro publishers through many outlets and into small niches. These cannot initially counter the loss of bookseller chains, of course, but they retain great potential.

It is also missed that ebooks, for all their sales, still reach only about 10% of the book buying public; they have massive potential because of that. But I doubt if the rest of the market is going to shrink very quickly.

During the downturn, which I believe has a long way to run, weaknesses in the publishing industry and supply chain will continue to cause a few lost heartbeats.

Perhaps the next step is to plan how the industry will do as it has before; rise pheonix-like from the ashes!

Right now the industry is about the biggest it has ever been and growing round the world. In such a setting the problems ahould be manageable.

@Joseph, I've said before on this page that I think POD is one of the most neglected storylines in the digital transition. I don't have any sense for how big a share of the market it's going to have in the long run but it will definitely grow. The possibilities are exciting, especially to those of us who still prefer holding a printed book in our hands.

We may simply disagree about the meaning of "quickly" but I do think the p-book market will shrink faster than most publishers are prepared for. The post at LibraryThing linked in the comment above is well worth reading as to why.

The problems of the transition will be "manageable" for the industry as a whole but, I believe, most challenging to the part of it that most readers are familiar with--the corporate trade publishing business that dominates what we find in bookstores.

So in a world where e-books take over more and more of the market, and when an author can "publish" their writing through Amazon or Borders in an e-book format, what role do publishers play in the future? Do they eventually perish all together, leaving us to sink or swim in an overpowering see of e-books with no flood gates to hold back the waves, or do you think they will survive? What will the publisher of the future offer to authors that they won't get from an Amazon book upload?

@anon, you're asking the 64-dollar question. My short answer is that publishers will certainly survive and some will flourish, for exactly the reason referred to in your comment- we help to pick out what's worth reading in the sea of Stuff to Read. I will try to give a longer answer in a future post.

About Me

I'm the author (with some colleagues) of WHAT EDITORS DO: The Art, Craft, and Business of Book Editing. I've worked as a book editor in New York for more than three decades. I was the founder, publisher, and editorial director of Bloomsbury Press, an imprint of Bloomsbury USA. I have also worked at Oxford University Press, Crown/Random House, St. Martin's Press, and Persea Books. On this page I talk about the book business in general and my own work in particular. I also comment frequently via Twitter: @DoctorSyntax. I can be reached by email at PG [at] doctorsyntax.net.
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